In an unprecedented move, the International Organization of Securities Commissions (IOSCO), an association of organizations that regulate the world’s securities and futures markets whose members include the Securities and Exchange Commission, has officially endorsed the inaugural Standards (IFRS S1 on general sustainability and IFRS S2 on climate-related disclosures) from the International Sustainability Standards Board (ISSB). This decision underscores a global commitment to enhance the consistency, comparability, and reliability of sustainability-related financial disclosures.
However, achieving a global standard for sustainability-related disclosures is a marathon, not a sprint. While the IFRS Foundation is committed to supporting regulators across the world, it acknowledges the challenges and varying levels of preparedness among jurisdictions. To this end, the plan is to balance addressing initial implementation challenges with the need to deliver the consistency and comparability required by capital markets.
The IFRS Foundation and ISSB’s adoption strategy focuses on four strategic pillars: proportionality, transitional reliefs, consistency in approaches on the phasing-in and scaling of requirements, and capacity building. These pillars aim to support jurisdictions in their journey towards adoption while addressing the differing starting points and level of preparedness.
A Call for Global Adoption
IOSCO’s endorsement signals a call to its 130 member jurisdictions, which regulate more than 95% of the world’s securities markets, to ponder on the methods of implementing these ISSB standards. The endorsement is a critical milestone, encouraging jurisdictions globally to adopt IFRS sustainability disclosure standards.
The timely endorsement from IOSCO, the Financial Stability Board’s decision to disband the Task Force on Climate-related Financial Disclosures, and the steps jurisdictions globally are embarking on towards regulation of sustainability disclosure, all demonstrate strong support for the ISSB’s work.
To ensure a smooth transition, the IFRS Foundation will develop a capacity-building program to deepen understanding and capabilities for implementing IFRS S1 and IFRS S2. In addition, robust mechanisms will be created to monitor the progress of these standards’ adoption in jurisdictions.
Hong Kong’s Response to the New Standards
The Hong Kong Securities and Futures Commission (SFC) has welcomed IOSCO’s endorsement of the ISSB Standards. The SFC will collaborate with relevant government departments, other financial regulatory bodies, and the Stock Exchange to devise a comprehensive roadmap for Hong Kong to adopt the ISSB standards. The CEO of the SFC, Julia Leung Fung-yee, has emphasized the importance for Hong Kong’s financial institutions and their corporate clients to familiarize themselves with the ISSB Standards to seize the enormous opportunities brought by the transition to sustainable finance.
Hong Kong listed companies will likely face new sustainability reporting requirements as a result of the ISSB standards. While the details of these requirements are still being worked out, companies should start preparing for the possibility of increased reporting obligations. This may require them to collect and disclose more data on their environmental, social, and governance (ESG) performance, which could be challenging for some companies, particularly smaller ones or those in certain industries.
The Role of Technology in this Journey
As sustainability reporting requirements become more complex, technology can help companies collect, analyze, and report ESG-related data more efficiently and accurately. By leveraging technology, companies can gain valuable insights into their ESG performance, identify areas for improvement, and make data-driven decisions that can help them achieve their sustainability goals. For example, artificial intelligence can help companies identify ESG risks and opportunities by analyzing large volumes of data from multiple sources. Blockchain can provide transparency and traceability across supply chains, helping companies track the environmental and social impact of their operations. Data analytics can help companies identify trends and patterns in their sustainability data, enabling them to make more informed decisions about how to improve their ESG performance.
The Role of Professionals in this Journey
For professionals like financial advisors and lawyers, understanding these new standards and their implications is crucial. With the onset of this new era of sustainability reporting, professionals have the opportunity to guide their clients through this transition, helping them to stay compliant, seize new opportunities, and avoid potential setbacks. This may involve investing in training and education to deepen their understanding of sustainability issues and how they relate to financial performance.
Pelican – Engaging in the Sustainability Shift
As the world transitions towards sustainability, Pelican is actively participating in the shift. We have consistently attracted a number of high-quality ESG deals, demonstrating our sector focus and commitment to sustainable growth. Our team of ESG engineers and consultants are continually refining our deal filters, enabling us to identify and support promising, sustainable opportunities for our investors.
Our extensive network of investors, listed companies, and projects in this sector enables us to facilitate ESG deals faster than others, creating impactful opportunities for our clients and contributing to a more sustainable future. We see the value in ESG and are poised to navigate this journey alongside our partners, clients, and stakeholders.
In conclusion, the global move towards ESG is not just a trend but a crucial shift for the future of our planet. As a company, Pelican is pleased to be part of this transformation and is interested in promoting sustainable growth in the financial sector. The road ahead is filled with potential, and we are looking forward to exploring the opportunities that lie within our journey towards a sustainable future.
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